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covered call writing and earnings reports

Locating Stocks During the Heart of Earnings Season

Never write a covered call or sell a cash-secured put when there is an upcoming earnings report prior to contract expiration. This is one of the most important rules in the BCI methodology. Adhering to this guideline can create challenges during the heart of earnings season when most companies publicize their financial statements. In our BCI […]

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Ask Alan

Ask Alan 127 – “Timing Exit Strategies When a Stock Price Gaps Up”

Alan answers a question posed by William, who asks: “You covered (pardon the pun) what happens when a stock price gaps down.How about what do you do when a stock gaps up like 20% that happened to HOG Friday on take-over rumors. Thanks, William”. ——— It’s the 2nd Wednesday of the month. Time for another […]

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exercise of options

Will My Broker Automatically Exercise Options That Expire In-The-Money?

We write a covered call or sell a cash-secured put. At expiration, the strike price is in-the-money. For calls that means lower then current market value and for puts it means higher than current market value. To demonstrate the moneyness of these strikes, let’s look at an options chain for Align technology (ALGN), a stock on […]

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covered call writing strategies

Poor Man’s Covered Call: Practical Application

Covered call writing involves first buying a stock or exchange-traded fund (ETF) and then selling call options on those shares. Each contract we sell requires us to sell 100 shares of the underlying. This can be a challenge for some investors who may look for stock substitutes that will lower cost basis and risk. Enter the […]

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covered call writing option premiums

Exercise Of Options From The Call Buyer’s Perspective

Since we are selling call and put options we know there are traders or market makers who are buying them. In this article we will explore why only about 10% of all call options are actually exercised by the option holders even when the holders want to own the underlying shares.   Why are call […]

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calculating Delta for covered call writing

Using Delta to Determine the Amount of Risk in Our Option-Selling Positions

Covered call writing and selling cash-secured puts are low-risk option-selling strategies used to generate monthly cash flow. Low-risk does not mean no risk so how can we measure the degree of risk we are undertaking? Let’s first all agree that any strategy that aspires to generate higher than a risk-free return (Treasuries, for example) will incur […]

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covered call writing calculations

Calculation Rules: Making Sense Of A Trade That Makes No Sense

Understanding option calculations is a necessary skill to become an elite covered call writer. The Ellman Calculator will do all the legwork but accurate and meaningful results are dependent on appropriate inputs. To highlight this point, let’s look at a real-life trade sent to me by Catherine who trades on the Toronto Stock Exchange:   […]

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employee stocks options compared to listed stock options

Employee Stock Options Compared to Listed Options

When we sell covered call and cash-secured put options, we are selling listed options or options listed on stock exchanges. There are several distinct differences between listed options and Employee Stock Options (ESOs). This article will focus in on these distinctions.   What is a listed option? Also called exchange-traded options, these securities are sold […]

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option liquidity showing Volume and Open Interest

Open Interest: How it’s Calculated and Why it’s Important

When selling call and put options, the liquidity of these securities must be evaluated to determine their eligibility. There are two measures of investor interest in options, Vol(ume) and Open Interest (OI). Vol represents the number of times a particular contract is bought or sold in a particular day. Open interest, on the other hand, […]

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